Attached files
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| 8-K - China Energy Recovery, Inc. | v207669_8k.htm |
| EX-10.2 - China Energy Recovery, Inc. | v207669_ex10-2.htm |
Exhibit
10.1
Lender
name: Hold and Opt Limited
Loan
principal amount: USD 5,000,000
Loan
maturity date: September 28, 2012
CHINA
ENERGY RECOVERY, INC.
CONTINUATION
AND LOAN AGREEMENT
THIS
CONTINUATION AND LOAN AGREEMENT (“Loan Agreement”) is entered
into by and among Hold and Opt Investments Limited, a Bahamas company (“Lender”), with offices at
Deltec House, Lyford Cay, P.O. Box N-3229, Nassau, Bahamas, China Energy
Recovery, Inc., a Delaware corporation (the “Company” or “CER”), and Mr. Wu Qinghuan, as
of this 31st day of December 2010.
WHEREAS,
CER and the Lender entered into a term loan note and agreement (the “2009 Loan”) as of May 21,
2009, under which CER, through its subsidiary, CER Energy Recovery (Shanghai)
Co., Inc. (“CER
Shanghai”) borrowed from the Lender the amount of USD $5,000,000 on
September 28, 2009, which amount is due September 29, 2011.
WHEREAS,
CER and the Lender wish that this Loan Agreement and the funding hereunder when
deemed made will be to modify the 2009 Loan, and this Loan Agreement shall be
deemed to be a continued lending arrangement between the Lender and CER, with
the consequence that the 2009 Loan will be modified in all respects, including
such provisions as the right of conversion into shares of common stock of CER
and related provisions. For clarity, any registration rights granted by separate
agreement by the Company at the time of the 2009 Loan shall continue to be
governed by such separate agreement and the termination of the 2009 Loan will
not affect that agreement in any way.
WHEREAS,
CER and the Lender agree that the terms of this Loan Agreement will only take
effect on September 29, 2011 and only when the Collateral (as defined
herein) shall be available as security for this Loan Agreement and the funding
hereunder, which date will be referred to as the “Loan Date.”
WHEREAS,
as security for this Loan Agreement and the Loan (as hereinafter defined), Mr.
Wu Qinghuan, the Chief Executive Officer of CER will pledge 8,000,006 shares of
common stock of CER (the “Collateral”), which shares
will be held under the terms of a collateral agent agreement (the “Collateral Agreement”) for the
benefit of the Lender among the Lender, Mr. Wu and Golenbock Eiseman Assor Bell
& Peskoe LLP, as collateral agent (the “Collateral Agent”), which will
be entered into after (i) the Collateral is release from the terms of a loan
entered into by the Company and its subsidiaries made on February 1, 2010 (the
“2010 Loan”) and (ii)
before the Loan Date. The shares comprising the Collateral have been
issued to Mr. Wu as “restricted securities” as that term is defined under Rule
144 (“Rule 144”) of the
United States Securities Act of 1933, as amended (the “33 Act”), and are subject to
the particular provisions of issuances by shell companies, therefore, it is
understood by the Lender that the nature of the Collateral has inherent
impairments as to the ability of the Lender to sell the Collateral, should it be
permitted to do so under the terms of this Loan and Collateral Agreement.
Because of this provision, Mr. Wu agrees to be a party to this Loan
Agreement.
NOW,
THEREFORE, in consideration of the respective representations, warranties and
agreements set forth herein, CER and the Lender, and to the extent applicable
Mr. Wu, agree as follows:
1. Loan and Interest; Late
Penalty. As of the Loan Date, CER is continuing to borrow from
the Lender the aggregate sum of USD$ 5,000,000 (the “Loan Amount”). The outstanding
principal amount and any other financial obligations under this Loan Agreement
shall bear interest at the annual rate of 15.1%, compounded monthly, commencing
the Loan Date, and continuing until the principal is paid in full. If
any payment of principal or interest is not made when due, then the payment will
bear a monthly penalty equal to 1.5% of the amount due, compounded monthly,
until paid in full.
2. Loan
Amount. The Loan Amount shall continue the principal amount
due under the 2009 Loan. As of the Loan Date, cash amounts due under
the 2009 Loan, other than the principal due thereunder, shall be paid in full,
provided however, if any cash amount or other cash obligation remains
outstanding under the 2009 Loan, then the terms of the 2009 Loan shall continue
as respect those terms only. Because the amount due under the 2009
Loan is equal to the Loan Amount, the Lender will not provide any new cash
funding under this Loan Agreement to the Company or its subsidiaries or
affiliates.
3. Maturity Date; Interest;
Payments. The maturity date of the Loan Amount will be September 29, 2012
(the “Maturity
Date”). Interest will accrue monthly and will be due and
payable at the Maturity Date. The payment of the Loan Amount, interest and any
other sums due under this Loan Agreement will be paid to the Lender without any
deduction for any withholding amounts imposed by any jurisdiction, taxes or
fees.
4. Prepayment. CER may prepay the
principal under this Loan Agreement in whole or in part, at any time or from
time to time, upon 30 days advance written notice to the Lender, without any
premium or other penalty. Each prepayment shall be accompanied by accrued
interest on the principal amount to be prepaid through the date of
payment. Any prepayment will be paid without any deduction for any
withholding amounts imposed by any jurisdiction, taxes or fees.
5. Exchange Rate Differential
Payment. As an additional inducement to the Lender to enter
into this Loan Agreement and to extend the Loan Amount, which payment will not
be considered interest hereunder, CER will compensate the Lender for any change
in the exchange rate between the RMB and United States Dollar (“USD”), after the Loan Date as
follows: if the RMB exchange rate between the RMB and USD is less
than the agreed upon exchange rate on the Loan Date, such that the value of the
RMB is greater than the USD, then the difference in the principal and/or
interest and/or cash amount (such as penalties) due that are being paid
calculated at the rate of RMB to USD on such repayment date will be converted
into a US dollar amount and paid to the Lender.
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The RMB
exchange rate between the RMB and USD, for the purposes of this provision, will
be determined as of the Loan Date, and will be confirmed in writing and approved
by mutual agreement between CER and the Lender.
For the
purposes of this Loan Agreement, the above formula is as follows:
{[(A
x B) – (A x C)] divided by C} = D
A = US
dollar amount of payment.
B = The
RMB to US$ exchange rate on date of Loan Date.
C = The
RMB to US$ exchange rate on the payment date, determined by the Bank of
China.
D =
Compensation amount, to be paid in cash to Lender
6. Obligation to Fund
Loan. Although the funding of the Loan Amount is a funding of
an amount previously extended by the Lender under the 2009 Loan, the Loan Date
will not be effective until the following documentation has been fully executed
and exchanged among the parties:
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a.
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The
Loan Agreement among the Lender, CER and Mr.
Wu;
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b.
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Evidence
from the lenders under the 2010 Loan of full payment and discharge of all
the obligations under the 2010 Loan, including any principal, interest and
interest rate differential shares, such that the Collateral has been
released and is free and clear of all encumbrances;
and
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c.
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Collateral
Agreement among Mr. Wu, CER and the Lender, for the benefit of the Lender,
it being understood that the Collateral Agent will not execute and deliver
the Collateral Agreement until it receives satisfactory evidence of the
full repayment and full discharge of the 2010 Loan and that the Collateral
is free and clear of all encumbrances, except for the terms of the
Collateral Agreement.
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7.
Events of
Default.
7.1 If
any of the following events (“Events of Default”) shall occur:
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(a)
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if
CER shall default in the payment of any part of the principal of or
interest on this Loan Agreement after the same shall have become due and
payable, whether at an installment date, maturity or at a date fixed for
prepayment or by declaration or otherwise; or if CER shall default in any
performance or payment obligation or compliance with any term contained in
this Loan Agreement; or
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(b)
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if
there shall be a default by CER or Mr. Wu in the performance of or
compliance with any term contained in Collateral Agreement;
or
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(c)
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if
CER or any subsidiary or affiliate shall default (as principal or
guarantor or other surety) in the payment of any principal of or premium,
if any, or interest on any indebtedness for borrowed money (other than the
Loan Agreement) or with respect to any of the terms of any evidence of
such indebtedness or of any mortgage, indenture or other agreement
relating thereto which default accelerates the maturity of such
indebtedness, and such default shall continue for more than the period of
grace, if any, provided therein without being consented to or waived by
such lender; or
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(d)
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if
CER or any subsidiary or affiliate shall make an assignment for the
benefit of creditors, or shall admit in writing its inability to pay its
debts as they become due, or shall file a voluntary petition in
bankruptcy, or shall be adjudicated a bankrupt or insolvent, or shall file
any petition or answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief
under any present or future statute, law or regulation, or shall file any
answer admitting or not contesting the material allegations of a petition
filed against CER or any subsidiary or affiliate in any such proceeding,
or shall seek or consent to or acquiesce in the appointment of any
trustee, receiver or liquidator of CER or any subsidiary or affiliate or
of all or any substantial part of the properties of CER or any subsidiary
or affiliate, or CER or any subsidiary or affiliate shall take any
corporate action looking to the dissolution or liquidation;
or
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(e)
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if,
within 30 days after the commencement of an action against CER or any
subsidiary or affiliate seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief
under any present or future statute, law or regulation, such action shall
not have been dismissed or all orders or proceedings thereunder affecting
the operations or the business of CER or any subsidiary or affiliate
stayed, or if the stay of any such order or proceeding shall thereafter be
set aside, or if, within 30 days after the appointment without the consent
or acquiescence of CER or any subsidiary or affiliate or any trustee,
receiver or liquidator of CER or any subsidiary or affiliate or of all or
any substantial part of the properties of CER or any subsidiary or
affiliate, such appointment shall not have been
vacated;
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(f)
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if
any material portion of CER’s or any subsidiary’s or affiliate’s assets is
attached, seized, subjected to a writ or distress warrant, levied upon, or
comes into the possession of any third person, including any government
body or agency;
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(g)
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if
CER or any subsidiary or affiliate is enjoined, restrained, or in any way
prevented by court or government or regulatory agency order from
continuing to conduct all or any material part of its business
affairs;
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(h)
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if
one or more final judgments in excess of the amount covered by insurance,
becomes a lien or encumbrance upon any of CER’s or any subsidiary’s or
affiliate’s assets;
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(i)
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if
any document or instrument that purports to create a lien on or with
respect to the Collateral shall, for any reason, fail or cease to create a
valid and perfected and, except to the extent permitted by the terms
hereof or thereof, first priority lien on and security interest in the
Collateral covered thereby; or
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(j)
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any
provision of the Loan Agreement or any document or instrument relating to
or securing the Loan Agreement shall at any time for any reason be
declared to be null and void, or the validity or enforceability thereof
shall be contested by CER or any subsidiary or affiliate of CER, or Mr. Wu
or a proceeding shall be commenced by CER or any subsidiary or affiliate
of CER, or by Mr. Wu or by any governmental authority having jurisdiction
over CER or any subsidiary or affiliate or Mr. Wu, seeking to establish
the invalidity or unenforceability thereof, or CER or any subsidiary or
affiliate of CER or Mr. Wu shall deny that it has any liability or
obligation purported to be created
thereunder;
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then, the
Lender, may at any time (unless all defaults shall have theretofore been
remedied) at its option, (i) by written notice or notices to CER, declare all
the obligations of this Loan Agreement to be due and payable, whereupon the same
shall forthwith mature and become due and payable together with interest accrued
thereon, without presentment, demand, protest or notice, all of which are hereby
waived; and (ii) exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein, or otherwise available to it, all the
rights and remedies of a secured party on default under the Uniform Commercial
Code or any other applicable law.
In case
any one or more Events of Default shall occur and be continuing, the Lender may
proceed to protect and enforce the rights of the Lender by an action at law,
suit in equity or other appropriate proceeding, whether for the specific
performance of any agreement contained herein, or for an injunction against a
violation of any of the terms hereof, or in aid of the exercise of any power
granted hereby or by law. In case of a default in the payment of any
principal of or interest under the Loan Agreement, CER will pay to the Lender
such further amount as shall be sufficient to cover the cost and expenses of
collection, including (without limitation) reasonable attorneys' fees, expenses
and disbursements. No course of dealing and no delay on the part of
the Lender in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise prejudice the Lender’s rights, powers and remedies under
any other agreement, rule principle, law or regulation. No right,
power or remedy conferred hereby upon the Lender shall be exclusive of any other
right, power or remedy referred to herein or now or hereafter available at law,
in equity, by statute or otherwise.
7.2 If
an Event of Default as stipulated in this Section 7 exists and at that time the
outstanding amounts due under this Note shall equal or exceed $1,000,000 in the
aggregate, the Lender will be permitted to exercise the rights set forth in the
Class B Preferred Stock, which include 100 shares of such class and have been
issued to the Lender (“Control
Preferred Stock”). Such shares will be transferable, in whole
or in part, with all or a portion of this Loan Agreement in the discretion of
the Lender. It is understood that because of this modification to the
2009 Loan, that the references in the Control Preferred Stock to Section 6 of
the 2009 Loan shall refer to Section 7 of this Loan Agreement.
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8. Guarantee and Security
Interest in Shares.
8.1
Shares as Limited
Guarantee. As an inducement to the Lender to enter into this Loan
Agreement, Mr. Qinghuan Wu, the Chief Executive Officer of CER (“Guarantor”)
will deposit the Collateral, which shall include distributions in respect of the
shares comprising the Collateral, as a guarantee and a security interest for the
repayment of the principal, interest and other obligations due under this Loan
Agreement. The Collateral will be governed by the Collateral
Agreement. The Guarantor has the right to enter into this Loan
Agreement and the Collateral Agreement, and the Collateral will be free and
clear of any encumbrances, including the provisions of the 2010 Loan and any
agreement related thereto on or before the Loan Date. This guarantee
is a limited guarantee, and to the extent any of the Shares are distributed to
the Lender, the guarantee shall be discharged by the Guarantor as to the amounts
due under this Loan Agreement as calculated in the Collateral
Agreement. The Guarantor and his heirs, executors and administrators
have no additional obligation under this guarantee other than to surrender the
Shares as provided in the Collateral Agreement. The Guarantor, in
certain circumstances, additionally has the right to request the return of
Shares and reduce its liability under the terms of the guarantee.
8.2 Conflicts
Waiver. Guarantor, CER and the Lender are aware or have been
informed and acknowledge that the Collateral Agent is one of several counsel for
CER and Lender and its affiliated and subsidiary corporations and persons and
each of them agrees that the Collateral Agent may continue to represent CER and
its affiliated and subsidiary corporations and/or the Lender and its affiliates
after date hereof in all matters notwithstanding the performance of its duties
and obligations hereunder, including, without limitation, representation with
respect to the escrow agreement, this Loan Agreement and the transactions
contemplated thereunder. Guarantor, CER and the Lender each hereby
waive any claim of conflict of interest relating to the Collateral Agent’s
duties, obligations and acts hereunder and waive any right or claim to object to
such continued legal representation by the Collateral Agent of CER and its
affiliated and subsidiary corporations or of the Lender and its affiliates on or
after the date hereof.
9. Right of First Refusal and
Consent to Future Fundings.
9.1 Right of First
Refusal. The Lender has the right of first refusal, to provide
any debt or equity financing to be undertaken by CER (including any subsidiary
or affiliate) that is for capital raising and similar capital purposes of CER
(including any subsidiary or affiliate), on the same terms as may be bona fide offered by any
lender or investor during the period while any of the principal or interest
under this Loan Agreement is outstanding, due or owing. If the Lender
fails to accept in writing any bona fide third party proposal within thirty (30)
business days after receipt of a written notice from CER (for itself or on
behalf of any subsidiary or affiliate) containing such proposal, then the Lender
shall have no claim or right with respect to any such financing contained in any
such notice. If, thereafter, such proposal is modified in any
material respect, CER (for itself or on behalf of any subsidiary or affiliate)
shall adopt the same procedure as with respect to the original proposed
financing.
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9.2 Consent to Future
Financings. The Lender has the right to approve the
entry into any debt or equity financing by CER, through itself or through any
subsidiary or affiliate, except for (i) debt financings for working capital and
similar purposes to CER (or any subsidiary or affiliate) from bank or
institutional lenders licensed to operate in China, and (ii) debt or equity
financings to CER (or any subsidiary or affiliate) where the principal, interest
and any other amount due and payable under this Note will be paid immediately
upon closing from the proceeds of such financing, without any requirement of
notice of demand from the Lender.
10. Representations of the
Lender.
10.1 Access. The
Lender has conducted its own independent review and analysis of the business,
operations, technology, assets, liabilities, results of operations, financial
condition and prospects of CER and its subsidiaries and affiliates, and
acknowledges that CER has provided the Lender access to the personnel,
properties, premises and books and records of CER and its subsidiaries and
affiliates for this purpose, and the Lender has had an opportunity to ask
questions of and receive responses from management of CER and its subsidiaries
and affiliates.
10.2 Investment
Intent. The Lender is making the loan evidenced hereby solely
for the purpose of investment and not with a view to, or for resale of any
securities of CER in connection with, any distribution thereof in violation of
the Securities Act of 1933, as amended.
10.3 Accredited
Investor. The Lender has the financial ability to bear the
economic risk of its investment, has adequate means for providing for its
current needs and financial contingencies and has no need for liquidity with
respect to its investment in CER and its subsidiaries and
affiliates. The Lender has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of the
prospective investment. Lender represents (A) it has not been
organized for the purpose of acquiring the Loan Agreement or (B) it is an entity
in which each of the equity owners is an accredited investor as defined in Rule
501(a) promulgated under the Securities Act of 1933, as amended.
11.
Representation of
CER. As an inducement to the Lender to make the Loan under the
Loan Agreements, CER makes the following representation to the
Lender:
11.1 SEC
Reports. CER has filed all reports required to be filed by it
under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
through the period ended December 31, 2009. The Annual Report for the
year ended December 31, 2009 was not filed timely, and the Quarterly Reports for
the three quarters ending during the year 2010 have not been filed and are
late. CER is currently delinquent in its obligations to file its SEC
Reports. Such reports required to be filed and as filed by CER under
the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, together
with any materials filed or furnished by CER under the Exchange Act, whether or
not any such reports were required are being collectively referred to herein as
the “SEC Reports” and,
together with this Loan Agreement, the “Disclosure
Materials”. As of their respective dates, the SEC Reports when
filed by CER complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the SEC
promulgated thereunder, and none of the SEC Reports, when filed by CER,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The consolidated financial statements of CER and its
consolidated subsidiaries and affiliated controlled companies included in the
SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect thereto as in
effect at the time of filing. Such financial statements were prepared
in accordance with United States generally accepted accounting principles
applied on a consistent basis during the periods involved (“GAAP”), except as
may be otherwise specified in such financial statements, the notes thereto and
except that unaudited financial statements may not contain all footnotes
required by GAAP or may be condensed or summary statements, and fairly present
in all material respects the consolidated financial position of CER and its
consolidated subsidiaries and affiliated controlled companies as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, year-end audit
adjustments. All material agreements to which CER or any Subsidiary
is a party or to which the property or assets of CER or any Subsidiary are
subject are included as part of or identified in the SEC Reports, to the extent
such agreements are required to be included or identified pursuant to the rules
and regulations of the SEC.
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11.2 Financial
Statements. Other than the entry into a RMB 30,000,000 loan
facility with the Bank of China and a draw down under that facility and its
proposal to repay the 2010 Loan, since the date of the latest audited financial
statements included within the SEC Reports (i) there has been no event,
occurrence or development that, individually or in the aggregate, has had or
that would result in a material adverse effect on the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of CER, (ii) CER, on a consolidated basis,
has not incurred any material liabilities other than (A) trade payables and
accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in CER’s
consolidated financial statements pursuant to GAAP or required to be disclosed
in filings made with the SEC, (iii) CER has not altered its method of accounting
or the changed its auditors, (iv) CER has not declared or made any dividend or
distribution of cash or other property to its stockholders, in their capacities
as such, or purchased, redeemed or made any agreements to purchase or redeem any
shares of its capital stock (except for repurchases by CER of shares of capital
stock held by employees, officers, directors, or consultants pursuant to an
option of CER to repurchase such shares upon the termination of employment or
services), and (v) CER has not issued any equity securities to any officer,
director or affiliate, except pursuant to existing CER stock-based
plans. CER and its subsidiaries and affiliates (including controlled
companies) have not taken any steps to seek protection pursuant to any
bankruptcy law nor does CER have any knowledge or reason to believe that its or
its subsidiaries’’ or affiliates’ creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so. CER and none of its subsidiaries
or affiliates, including CER Hong Kong, as of the date hereof, and after giving
effect to the transactions contemplated hereby to occur, is not and will not be
Insolvent (as defined below). For purposes of this section, “Insolvent” means (i) the
present fair saleable value of CER assets is less than the amount required to
pay CER’s total indebtedness, (ii) CER is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) CER intends to incur or believes
that it will incur debts that would be beyond its ability to pay as such debts
mature, or (iv) CER has unreasonably small capital with which to conduct the
business in which it is engaged as such business is now conducted and is
proposed to be conducted.
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12. Covenants.
12.1 Reports. (a) So
long as this Loan Agreement remains outstanding, CER shall have its annual
consolidated financial statements audited and its interim consolidated financial
statements reviewed by a firm of independent registered accountants in
accordance with Statement on Auditing Standards 101 issued by the American
Institute of Certified Public Accountants (or any similar replacement
standard). In addition, so long as this Loan Agreement is
outstanding, CER shall furnish to the Lender all annual and quarterly reports of
CER on Forms 10-K and 10-Q, respectively, and all current reports on Form 8-K,
in each case as and when filed by it with the Securities and Exchange Commission
(“SEC”). If CER shall not be subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), it shall nevertheless furnish the Lender with (a) the financial
information that would be required to be contained in a filing on such annual or
quarterly report, including a “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and (b) all information that would be
required to be contained in filings with the SEC on Form 8-K. All
such annual reports shall be furnished within 135 days after the end of the
fiscal year to which they relate, and all such quarterly reports shall be
furnished within 50 days after the end of the fiscal quarter to which they
relate. All such current reports shall be furnished within the time
periods specified in the SEC’s rules and regulations for reporting companies
under the Exchange Act.
(b) At
CER’s option, CER shall either (i) distribute such information and such reports
(as well as the details regarding the conference call described below)
electronically to the Lender, and/or (ii) make available such information to the
Lender by posting such information on the Internet (which may be its own or
CER’s site, IntraLinks or any comparable password protected online data system
which will require a confidentiality acknowledgement or otherwise, and CER shall
provide such password thereto to the Lender and make such information readily
available to such holder, who agrees to treat such information as
confidential).
12.2 Taxes. CER
shall, and shall cause each of its subsidiaries and affiliates to, pay prior to
delinquency all material taxes, assessments, and governmental levies except as
contested in good faith and by appropriate proceedings.
12.3 Limitations on
Liens. CER and its subsidiaries and affiliates shall not
create, incur, assume or permit or suffer to exist any lien, claim or
encumbrance of any nature whatsoever against any of the Collateral, unless
contemporaneously therewith, such lien is subordinated in right of payment to
the Loan Agreement.
12.4 Conduct of
Business. CER shall not, and shall not permit any subsidiary
or affiliate to, engage in any business other than the business of designing,
manufacturing, installing and selling boilers and heat recovery systems, and
related items.
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12.5 Maintenance of Properties;
Insurance; Compliance with Law.
(a) CER
shall, and shall cause each of its subsidiaries and affiliates to, at all times
cause all properties used or useful in the conduct of their business to be
maintained and kept in good condition, repair and working order (reasonable wear
and tear excepted) and supplied with all necessary equipment, and shall cause to
be made all necessary repairs, renewals, replacements, necessary betterments and
necessary improvements thereto.
(b) CER
shall maintain, and shall cause to be maintained for each of its subsidiaries
and affiliates, insurance covering such risks as are usually and customarily
insured against by corporations similarly situated in the markets where CER its
subsidiaries and affiliates conduct their respective operations, in such amounts
as shall be customary for corporations similarly situated and with such
deductibles and by such methods as shall be customary and reasonably consistent
with past practice.
(c) CER
shall, and shall cause each of its subsidiaries and affiliates to, comply with
all statutes, laws, ordinances or government rules and regulations to which they
are subject, non compliance with which would materially adversely affect the
business, earnings, properties, assets or financial condition of the CER its
subsidiaries and affiliates taken as a whole.
12.6 Legal
Existence. CER for itself, and shall cause each of its
subsidiaries and affiliates for each respective entity, shall do or shall cause
to be done all things necessary to preserve and keep in full force and effect
its legal existence, in accordance with its organizational documents (as the
same may be amended from time to time). CER and its subsidiaries and affiliates
shall not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its subsidiaries and
affiliates if the respective board of directors and the board of
directors of CER shall determine that the preservation thereof is no longer
desirable in the conduct of the business of CER and its subsidiaries and
affiliates, taken as a
whole, and that the loss thereof is not adverse in any material respect
to the holders of the Loan Agreements.
12.7 Assets. CER and its
subsidiaries and affiliates each has good and marketable title in all personal
property owned by it that is material to their respective businesses, in each
case free and clear of all liens and encumbrances. The real property
owned or leased by CER and its subsidiaries and affiliates are held by them
under valid, subsisting and enforceable purchase contracts or leases of which
CER and its subsidiaries and affiliates are in material
compliance. CER and its subsidiaries and affiliates will take
all action necessary, at its sole expense, to maintain the marketable title in
all its personal property and real property, whether owned or
leased.
12.8 Limitations on Mergers,
Consolidations, etc. (a) CER shall not, directly or
indirectly, in a single transaction or a series of related transactions, (i)
consolidate or merge with or into another person, or sell, lease, transfer,
convey or otherwise dispose of or assign all or substantially all of the assets
of CER and its subsidiaries or affiliates (taken individually or as a
whole) or (ii) adopt a plan of liquidation for either of the entities or
of any of the subsidiaries or affiliates unless, in either case:
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(A) CER
will be the surviving or continuing person; or
(B) the
person or entity formed by or surviving such consolidation or merger or to which
such sale, lease, conveyance or other disposition shall be made (or, in the case
of a plan of liquidation, any person to which assets are transferred)
(collectively, the “Successor”) is a corporation,
limited liability company or limited partnership, and the Successor expressly
assumes, by agreements in form and substance reasonably satisfactory to the
holders of a majority in principal amount of the Loan Agreements, all of the
obligations of CER under this Loan Agreement and all the related
agreements.
(b) Upon
any consolidation, combination or merger of CER or any transfer of all or
substantially all of the assets of CER in accordance with the foregoing, in
which CER is not the continuing obligor under this Loan Agreement, the surviving
entity formed by such consolidation or into which CER is merged or the person to
which the conveyance, lease or transfer is made will succeed to, and be
substituted for, and may exercise every right and power of, CER under this Loan
Agreement, with the same effect as if such surviving entity had been named
therein and, except in the case of a lease, CER will be released from the
obligation to pay the principal of and interest under this Loan Agreements and
all of CER’s other respective obligations and covenants under this Loan
Agreement.
(c) Notwithstanding
the foregoing, any subsidiary or affiliate may consolidate with, merge with or
into or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all of its assets to CER or another
subsidiary.
13. Miscellaneous.
13.1 Savings
Clause. In no event shall the interest rate or rates payable
under this Loan Agreement, plus any other amounts paid
in connection herewith, exceed the highest rate permissible under any law that a
court of competent jurisdiction shall, in a final determination, deem
applicable. CER, in executing and delivering this Loan Agreement, and the Lender
in accepting it, intends legally to agree upon the rate or rates of interest and
manner of payment stated herein; provided, however, that,
anything contained herein to the contrary notwithstanding, if said rate or rates
of interest or manner of payment exceeds the maximum allowable under applicable
law, then, ipso facto, as of the date of this
Loan Agreement, CER is and shall be liable only for the payment of such maximum
as allowed by law, and payment received from CER in excess of such legal
maximum, whenever received, shall be applied to reduce the principal balance of
this Loan Agreement to the extent of such excess.
13.2 Governing Law;
Venue. This Loan Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, United States of
America.
ALL
ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS LOAN AGREEMENT SHALL BE
TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF
DELAWARE; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
PROPERTY MAY BE BROUGHT, AT THIS LOAN AGREEMENT HOLDER’S OPTION, IN THE COURTS
OF ANY JURISDICTION WHERE SUCH PROPERTY MAY BE FOUND. THE COMPANY AND
HOLDER OF THIS LOAN AGREEMENT WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR
TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH
THIS SECTION 13.2.
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13.3 Attorney-in-Fact. CER
hereby irrevocably appoints the Lender its attorney-in-fact, with full authority
in the place and stead of CER and in the name of CER or otherwise, at such time
as an Event of Default has occurred and is continuing under this Loan Agreement
to take any action and to execute any instrument which the Lender may reasonably
deem necessary or advisable to accomplish the purposes of this Loan Agreement
including:
(a) to
ask, demand, collect, sue for, recover, compromise, receive and give acquittance
and receipts for moneys due and to become due under or in connection with this
Loan Agreement; and
(b) to
file any claims or take any action or institute any proceedings which the Lender
may deem necessary or desirable for the collection of amounts due or enforcement
of obligations under this Loan Agreement or otherwise to enforce the rights of
the Lender under this Loan Agreement.
To
the extent permitted by law, CER hereby ratifies all that such attorney-in-fact
shall lawfully do or cause to be done by virtue hereof. This power of attorney
is coupled with an interest and shall be irrevocable until this Loan Agreement
is paid in full.
13.4 Remedies
Cumulative. The rights and remedies of Lender under this Loan
Agreement, shall be cumulative. The Lender shall have all the other rights and
remedies not inconsistent herewith as provided under the law, or in
equity. No exercise by the Lender of one right or remedy shall be
deemed an election, and no waiver by the Lender of any Event of Default shall be
deemed a continuing waiver. No delay by the Lender in the enforcement
of the terms of this Loan Agreement shall constitute a waiver, election, or
acquiescence by it.
13.5 Amendment. This
Loan Agreement and its terms only may be changed, waived or amended only by the
written consent of CER and the Lender.
13.6 Severability. In
case any provision contained herein (or part thereof) shall for any reason be
held to be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality, or other unenforceability shall not affect any other provision (or
the remaining part of the affected provision) hereof, but this Loan Agreement
shall be construed as if such invalid, illegal, or unenforceable provision (or
part thereof) had never been contained herein, but only to the extent that such
provision is invalid, illegal, or unenforceable.
13.7 Assignment. The
Lender may assign to one or more assignees (each an “Assignee”) all, or any ratable
part of all, of this Loan Agreement and the other rights and obligations of the
Lender hereunder and any of the Control Preferred Stock; provided, that CER may
continue to deal solely and directly with the Lender in connection with the
interest so assigned to an Assignee until (i) written notice of such assignment,
together with payment instructions, addresses, and related information with
respect to the Assignee, have been given to CER by the holders and the Assignee,
and (ii) the holder and its Assignee have delivered to CER a document reflecting
such assignment and acceptance reasonably acceptable to CER.
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13.8 Payment Set
Aside. To the extent that CER makes a payment or payments to
the Lender hereunder or the Lender enforces or exercises its rights hereunder,
and such payment or payments or the proceeds of such enforcement or exercise or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to CER by a trustee, receiver or any
other person under any law (including, without limitation, any bankruptcy law,
other law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not
occurred.
13.9 Independent Nature of
Lender’ Obligations and Rights. The obligations of the Lender
under this Loan Agreement and related agreements (together, the “Transaction Documents”) are
several and not joint with the obligations of any other Lender, and no Lender
shall be responsible in any way for the performance of the obligations of any
other Lender under any Transaction Documents, except were actions are taken
jointly as provided in the Transaction Documents. The decision of
each Lender to make their respective Loan pursuant to this Loan Agreement has
been made by such Lender independently of any other Lender and independently of
any information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of CER and its subsidiaries and
affiliates, taken as a whole. which may have been made or given by any other
Lender or by any agent or employee of any other Lender, and no Lender or any of
its agents or employees shall have any liability to any other Lender (or any
other person) relating to or arising from any such information, materials,
statements or opinions. Nothing contained herein or in any
Transaction Document, and no action taken by any Lender pursuant thereto, shall
be deemed to constitute the Lender as a partnership, an association, a joint
venture or any other kind of entity. Each Lender acknowledges that no
other Lender has acted as agent for such Lender in connection with making its
Loan under this Loan Agreement and that no other Lender will be acting as agent
of such Lender in connection with monitoring its investment
hereunder.
13.10 Survival. The
representations and warranties, agreements and covenants contained herein shall
survive the making of the Loan or advance of funds and the repayment of the Loan
or advance of funds, as herein contemplated.
13.11 Execution. This
agreement and all related agreements, instruments and documents may each be
executed in two or more counterparts, all of which when taken together shall be
considered one and the same agreement, instrument, or document and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that all parties need not sign the same
counterpart. In the event that any signature is delivered by
facsimile transmission or email attachment, such signature shall create a valid
and binding obligation of the party executing (or on whose behalf such signature
is executed) with the same force and effect as if such facsimile or
email-attached signature page were an original thereof.
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13.12 Headings. Headings
and numbers have been set forth herein for convenience only. Unless
the contrary is compelled by the context, everything contained in each section
applies equally to this entire Loan Agreement.
[signature
on next page]
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IN
WITNESS WHEREOF, the parties have caused this Loan Agreement to be signed in its
name as of the date above written.
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CER
ENERGY RECOVERY, INC
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By: __________________________
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Name:
Wu Qinghuan,
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Title: Chief
Executive Officer
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WU
QINGHUAN, Individually
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______________________________
AGREED
AND ACCEPTED BY:
HOLD AND
OPT INVESTMENTS LIMITED
By: __________________________
Name:
Timothy Fraser-Smith
Title: Authorized
Signatory for Hold And Opt Investments Limited
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